Should you withdraw your Pension Fund?

During the Budget 2014 announcement, back in April, George Osborne announced that pensions will become more flexible. From April 2015, if you are aged 55 or over, you can withdraw your pension pot, and pay only a marginal amount of income tax on that withdrawal. Since the announcement, many people have already decided that they will be withdrawing the whole of their pension. However, it is important that before such a decision is made, all of the options are considered. You may want immediate access to the money, but will this be cost-effective in the long run? It is true that you will only be charged a minimal amount for the withdrawal, but where will you then invest your money? Many have considered savings accounts. While for some these may be beneficial, you will still need to pay income tax on any withdrawals you make, and the returns on these accounts are likely to be poor. If you are looking into alternative investments, you need to ensure these are stable and will provide you with a return if needed. What’s more, when moving your money from your pension into other financial investments, you could have to pay charges as well as income tax, and the returns may still be lower than those you would receive in the pension fund. On the other hand, if you are looking to withdraw your money to pay off debts, such as your mortgage, you should definitely feel the benefit, especially as the interest you save from your monthly instalments can be saved. Before making any decisions you need to look at all of the pros and cons, and decide where your money is better off invested. It may be that leaving your pension as it is and drawing out smaller amounts when needed will be more financially advantageous. Once you have withdrawn your money, it cannot be put back. Therefore, ensure you make the right decision for your financial circumstances. For any financial advice, our partners, Bradbury Hamilton, are able to advise. Visit www.bradburyhamilton.co.uk or call Sheriar Bradbury on 020 7220 7274.